The Difference Between Guarantor Companies and Joint Guarantors | 2026 Rental Contract Trends
The joint guarantor system, once commonplace in Japan, has undergone dramatic changes due to the widespread adoption of guarantor companies. This guide explains the key differences between the two, the latest industry trends, and how both tenants and landlords should approach the decision.
The Decline of the Joint Guarantor System and the Rise of Guarantor Companies
In the past, the use of joint guarantors was standard practice in Japanese rental contracts. It was common to request a family member or relative to sign and seal documents as a guarantor, which served as security for landlords in case of rent default. However, following the 2020 Civil Code amendment that made it mandatory to disclose the maximum liability amount (maximum guarantee ceiling) for joint guarantors, this practice rapidly declined. As the disclosure of maximum liability made guarantee risks transparent, more family members became reluctant to assume the guarantor role, making it increasingly difficult to secure guarantors.
Today, many property management companies and landlords require the use of guarantor companies, and cases where no joint guarantor is needed have become the mainstream. This shift is driven by Japan's aging population, the rise of single-person households, and the weakening of family ties, resulting in more prospective tenants unable to secure a joint guarantor. As of 2026, guarantor companies are the standard in over 90% of rental contracts in urban areas. This trend is spreading to regional cities as well, making guarantor companies the de facto standard in the rental market.
The Fundamental Differences Between Joint Guarantors and Guarantor Companies
Although both joint guarantors and guarantor companies share the purpose of guaranteeing a tenant's obligations, their nature differs significantly.
A joint guarantor is an individual who assumes guarantee obligations without compensation. Unlike other types of guarantors, joint guarantors have no right of search and cannot claim that the landlord must first demand payment from the tenant; the landlord can demand payment directly from the joint guarantor. Moreover, guarantees cover not only rent but also restoration to original condition costs and damages, sometimes placing substantial financial burden on the joint guarantor. After the Civil Code amendment, setting a maximum liability amount became mandatory, but guarantors may still face claims of several million yen.
In contrast, guarantor companies are corporations that provide guarantee services as a business. They collect guarantee fees from tenants, make substitute payments to landlords when rent is not paid, and then pursue recovery from the tenant. Guarantor companies have substantial financial resources and expertise in debt collection and legal proceedings. Compared to individual joint guarantors, their reliable ability to make substitute payments provides landlords with significantly greater peace of mind.
How Guarantor Companies Work and Their Screening Standards
Guarantor companies collect guarantee fees from tenants and provide a system where they make substitute payments to landlords in case of rent default, later pursuing recovery from the tenant. While tenants are relieved of the burden of finding a joint guarantor, they incur the additional cost of guarantee fees. Typically, the initial guarantee fee ranges from 50% to 100% of the monthly rent, with annual renewal fees around ¥10,000. Note that guarantee fees are non-refundable, so it's important to understand the total cost before signing the lease.
Guarantor companies are broadly classified into three types: credit-based, independent, and association-affiliated. Credit-based guarantor companies are operated by credit card companies and similar entities, using credit information agency data in their screening process. Applicants with a history of credit card delinquency or debt restructuring are more likely to fail their screening. Independent guarantor companies have their own screening criteria and are said to be more accessible to those who have recently changed jobs or who are self-employed or freelancers. LICC (the All Japan Rental Guarantee Business Association) member companies share a database, so a single delinquency record with any member can result in stricter screening across multiple companies—a point worth noting.
Benefits and Considerations from a Landlord's Perspective
For landlords, the biggest advantage of guarantor companies is the practical transfer of rent default risk. When default occurs, guarantor companies make substitute payments, significantly reducing the effort required for debt collection and legal proceedings. This is particularly valuable for landlords in remote locations or those managing multiple properties, offering significant peace of mind.
In recent years, combined services offering both rental liability and rent guarantee have emerged. Plans that compensate for rent during vacancies and other products supporting landlord income stability are increasing, helping maintain property value.
However, careful selection of a guarantor company is necessary. The reliability and financial health of the guarantor company affect the quality of service when issues arise. Choosing a property management company that partners with multiple guarantor companies and can recommend the appropriate one based on the tenant's profile contributes to long-term stable operations. Since there is also a risk of guarantor company insolvency, it is recommended to select companies with established track records and standing in the industry.
Key Points for Prospective Tenants to Check
For prospective tenants, the first step is to confirm the total guarantee fee. Even for the same property, initial costs can vary by tens of thousands of yen depending on which guarantor company is used. It's also important to clarify in advance the renewal payment terms (monthly plan or annual lump sum), refund policies for early termination, and alternative options if screening fails.
If you have a history of delinquency at another property, you may have difficulty passing screening with the same guarantor company group. Understanding the differences between credit-based, independent, and LICC-affiliated companies, and selecting one that matches your profile, is key to success. It's also effective to candidly ask your real estate agent which guarantor companies are easier to qualify for.
Depending on your status—whether you're a foreign national, international student, or senior—certain guarantor companies may not be available. One option is to look for independent guarantor companies that explicitly accept foreign nationals, or to consider public housing options like UR Apartments where neither a joint guarantor nor guarantor company is required.
Future Regulatory Prospects
The rental industry is discussing stronger regulatory oversight of guarantor companies. To prevent excessive debt collection and opaque fee structures, both industry self-regulation and stronger government legal oversight are under consideration. In 2024, the Ministry of Land, Infrastructure, Transport and Tourism signaled its intent to strengthen oversight of guarantor companies within the framework of the Rental Housing Management Business Act, with the expectation of eliminating unscrupulous operators.
Additionally, screening methods using AI and credit scoring are becoming more sophisticated. By combining traditional demographic information with real-time income data and behavioral history, it's becoming possible to approach groups that previously failed screening. This is expected to improve housing access for groups previously excluded from the rental market, such as freelancers and foreign nationals.
Guarantor companies have become essential infrastructure supporting rental life for both tenants and landlords. Understanding the changes in this system and selecting a trusted partner is the shortcut to trouble-free rental management and a comfortable home-hunting experience.
Even if you don't pass a guarantor company screening, there's no need to give up. By understanding the main reasons for rejection and putting into practice multiple solutions—such as reapplying with a different guarantor company, utilizing a joint guarantor, or changing properties—your chances of successfully signing a rental agreement will expand significantly.
